Shares of the cloud telephony software provider RingCentral Inc. were trending lower in the extended trading session today, following a somewhat disappointing forecast. Although it beat expectations on earnings and revenue in its latest results, its guidance came up light.

The company reported a net loss of $47.2 million in the fourth quarter of fiscal 2023, down significantly from the $284 million loss it reported a year earlier. Earnings before certain costs such as stock compensation came to 86 cents per share, beating Wall Street’s target of 83 cents. Meanwhile, revenue came to $571.3 million, up 9% from a year earlier and above the Street’s consensus estimate of $569.7 million.

RingCentral also provided its full-year results, reporting a net loss of $165.2 million, with total revenue of $2.2 billion, up 11% from the prior year.

The company sells a cloud-based communications platform that’s aimed at small and medium-sized businesses. Its system bundles phone, video, messages, texts, chats, conferencing and fax services into a single platform. It provides a consistent user interface across computers, smartphones and tablets, so there’s no need to use separate applications for each function. Companies can and do use RingCentral to power their entire contact center operations.

RingCentral founder and Chief Executive Vlad Shmunis (pictured) said the company ended the year on a strong note. “The solid traction we are seeing with our new products demonstrated the progress we are making in becoming an AI-first, multi-product company as we deliver on our strategy of delivering durable, profitable growth,” he said.

The company also reported annualized recurring revenue from subscriptions of $2.33 billion, up 11% from a year earlier. It revealed that its mid-market and enterprise ARR was up 12% from a year earlier to $1.458 billion, while enterprise ARR rose 13% to $1.005 billion.

Holger Mueller of Constellation Research Inc. said RingCentral did well to beat the $2 billion annual revenue milestone so comfortably, showing decent growth and cost discipline to increase its profitability. However, he said investors may have been disappointed that the cost reductions were primarily made on the research and development side, whereas sales, marketing and general and administrative costs actually increased. “It’s a concern because, with AI being so omnipresent these days, companies like RingCentral must keep innovating to ensure they can play a role in the future of work,” Mueller said. “But on the other hand, if Vlad Shmunis and team are able to deliver another strong year like this one, the company should finally become profitable, and there’s much to like about that.”

Although some of those numbers were encouraging, RingCentral could only offer a somewhat tepid forecast for the current quarter, saying it’s targeting earnings of between 79 and 80 cents per share on revenue of between $575 million and $580 million. Both figures came in below Wall Street’s forecast, with analysts earlier modeling earnings of 82 cents per share on sales of $581.5 million.

Investors reacted badly to the lower forecast and RingCentral’s stock was trading 6% lower in the after-hours session.

The full-year picture looks better, at least, with the company saying it’s aiming for fiscal 2024 earnings of between $3.50 and $3.58 per share on sales of between $2.37 billion to $2.4 billion. Those figures contrast with Wall Street’s target of $3.51 per share in earnings on total sales of $2.4 billion.

Photo: RingCentral